The Euro of course has been very noisy during the trading session as we had an ECB meeting, but it's worth noting that despite the fact that the ECB didn't do anything and the Euro lost ground against several other currencies, it has turned around against the Japanese Yen.
This tells you just how weak the Japanese yen actually is. And with that being the case, I think you have to look at it through the prism of a market that is telling you anti-yen sentiment is still a big thing. As long as you get paid to hang on to this pair at the end of every day, it makes sense that you continue to hold it. I don't have any interest whatsoever in trying to short this market right now.
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Major Support Below
I think the 170 yen level ends up being a major support level based on psychology, if nothing else. So, with that, I am looking at each dip as a potential buying opportunity. And I recognize that at this point, market participants continue to pay attention to that interest rate differential. The meeting in September, according to the ECB, is wide open for potential interest rates changes so we'll have to wait and see but what we do know is that the Bank of Japan simply can't do much right now with its interest rate policy due to the fact that the debt in Japan is so overextended and therefore it's essentially stuck.
The Bank of Japan has intervened a couple of times recently, but you can see that the pair still looks very well supported so longer term, we're still very much in an uptrend and I just don't see why you would try to short it. After all, Japan is essentially stuck with its debt problem, and for years I have been hearing “Japan is a bug looking for a windshield.” It may be in the process of finding that windshield.
It is also worth noting that the ECB suggested that the September meeting is “wide open”, meaning for rate cuts, and the Euro still bounced against the yen. That might say everything in all actuality.
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